Blackstone Posts 56% Rise in Quarterly Profit

One year made a very big difference for the Blackstone Group, especially for its huge real estate unit.

The company reported a 56 percent gain in fourth-quarter profit over the same period of 2009, and doubled its profit for all of 2010.

The strong results by Blackstone, one of the first major buyout firms to become a publicly traded company, may augur more good news for the private equity industry. As the stock and debt markets improve, the value of these firms’ portfolio companies rise, leading to increased fees and, eventually, opportunities to cash out.

Blackstone’s quarterly profit, reported as economic net income after taxes because it excluded charges tied to its 2007 initial public offering, amounted to 46 cents a stock unit. That outstripped the consensus estimate of analysts for 36 cents a unit, according to Thomson Reuters.

On the basis of generally accepted accounting principles, Blackstone reported a loss of nearly $11 million, a big narrowing from 2009.

“I believe the firm is entering 2011 in the strongest condition I’ve ever seen in its 25-year history,” Stephen A. Schwarzman, the firm’s co-founder, chairman and chief executive, said on a conference call on Thursday. He spoke from Blackstone’s Paris office, where he will be based for the next four months to focus on the firm’s international business.

Blackstone’s earnings are a sharp turnaround from 2009, when several of its portfolio companies were battered by the financial crisis. Since then, the firm has been able to repair some of its properties and prepare sales or initial public offerings of others, as well as pursue new acquisitions.

Nowhere was that more evident than in Blackstone’s real estate unit, its largest business. The division swung to a $639.5 million profit in the fourth quarter, from a loss in 2009, and reaped $1 billion in revenue, owing to a rise in the value of investments like Hilton Hotels, whose debt the firm has refinanced.

Company executives said on analyst conference calls on Thursday that Blackstone planned to raise its seventh real estate fund this year.

Blackstone’s private equity division reported $828.4 million in revenue for the year, after more than doubling its investment income to $168.6 million. The unit’s economic net income, however, dipped slightly, to $485.5 million, on lower transaction and performance fees.

Blackstone’s financial advisory unit, its original business, reported a slight drop in profit, to $83.7 million, though revenue rose to $431.9 million. Much of the gain was driven by the firm’s fund placement business, Park Hill, while business at Blackstone’s restructuring unit continued to taper off as the economy improved.

The firm said it had plenty of “dry powder,” or uninvested capital, to put to work. Its private equity unit had $16.5 billion as of Dec. 31, its real estate division had $9.1 billion and its hedge fund operations had $4.5 billion.

Hamilton E. James, Blackstone’s president, said on a conference call with reporters on Thursday that with bulging war chests and cheap financing still available, private equity firms could “comfortably” strike a $10 billion leveraged buyout this year. He added that the firm expected to do more deals in the United States, Brazil and Europe this year, and fewer in Asia.